A woman, right, looks at herself on her phone as she and others buy warm winter hats at a vendors shop in the Panjiayuan Market on December 6, 2024 in Beijing, China.
Kevin Frayer | Getty Images
China’s economy showed a modest pickup for the first two months of the year, according to data published Monday by the National Bureau of Statistics, as Beijing reiterated its plan to bolster domestic consumption.
Retail sales rose by 4.0% in the January-February period from a year ago, compared with the 3.7% year-on-year growth in December and in line with Reuters estimates.
Industrial production climbed 5.9% in the first two months of the year from a year ago, slower than the 6.2% growth in December, but faster than a 5.3% expansion forecast by analysts in a Reuters poll. Industrial output growth in the equipment-making and high-tech manufacturing sector accelerated, the statement said, growing 10.6% and 9.1% on year, respectively.
Fixed asset investment, reported on a year-to-date basis, rose by 4.1%, beating the 3.6% growth estimated by economists, a notable jump from the 3.2% increase last year.
The statistics agency attributed the improvement in economic activities at the start of the year to “sustained effects from several stimulus measures,” while flagging “a more complicated and challenging external environment, insufficient domestic demand and difficulties for enterprises in operation and production,” according to a CNBC translation of the Chinese statement.
“The foundation for a sustainable economic recovery is still unstable,” it added.
The data comes shortly after Chinese policymakers unveiled a wide-ranging plan to stimulate domestic consumption, reiterating Beijing’s pledges to bolster residents’ income and household spending.
The notice, published Sunday, repeated Beijing’s plan to stabilize the stock market, establish a childcare subsidy scheme as well as boosting tourism.
While the high-level document appears to lack concrete implementation details, it provides a glance into Beijing’s stance toward addressing some deep-seated issues, such as the slowing income growth and insufficient social safety net, Lynn Song, chief China economist at ING, told CNBC via email.
“Directionally it is quite encouraging that policymakers are taking a sober look at these themes, and it should help the longer term transition to a consumption driven economy,” he added.
China’s unemployment rate in urban areas rose to 5.4% in February, the highest level in two years, according to LSEG data based on the official figures.
Separate data on Monday showed China’s new home prices fell 4.8% in February from a year ago, a smaller decline than the 5.0% drop in January.
Investment into real estate development fell 9.8% year-on-year in the two months, compared with a 10.6% decline in December. The data reflected policymakers’ efforts to provide credit support to the cash-strapped developers, Zichun Huang, China economist at Capital Economics, said in a note.
Growth target ‘will not be easy’
Chinese leadership took on a hefty task by keeping a growth target of “around 5%” this year, a target seen harder to reach given rising trade tensions with the U.S. and entrenched deflationary pressure for the economy.
Fu Lingui, spokesperson for the statistics bureau, said at a press conference on Monday that achieving this year’s growth target “will not be easy.”
Economists say Beijing will likely need to provide stronger stimulus to achieve this year’s growth target and bolster domestic consumption to fill the hole left by potentially slowing exports. Exports contributed nearly a quarter of China’s GDP last year.
China’s exports growth slowed significantly in the first two months while imports plunged on lackluster domestic demand. Consumer price inflation in February fell below zero for the first time in over a year.
Beijing revised down its annual inflation target to “around 2%” — the lowest in more than two decades — from above 3% in prior years, a move seen to show a degree of official acceptance of the current deflationary environment.
As part of an expanded fiscal package, Chinese leaders pledged at an annual parliamentary meeting earlier this month an additional 300 billion yuan ($41.5 billion) of ultra-long special treasury bonds for consumers’ subsidy support.
Still, beyond the trade-in program, the existing stimulus measures have barely targeted consumers directly.
Beijing’s directive to boost consumption is “a step in the right direction … but as is the case with other policy directives, its effectiveness will depend on how it will be implemented at the local level, and on how many resources will be put behind it,” said Alfredo Montufar-Helu, head of the China Center at The Conference Board, yet “these remain unknown.”